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Tuesday, June 30, 2009

First Qualcomm (QCOM), now Apple (AAPL). Remember the GSM vs CDMA phone standards wars some 15+ years ago? The European Union [EU] at that time turned against Qualcomm in favor of the Nokia (NOK)-Ericsson (ERIC)-Alcatel (ALU)-Siemens (SI) backed GSM standard, mandating it in Europe and therefore limiting what would have been an even greater potential for Qualcomm.

Fast forward some 15+ years, and they’re baaack! The EU is now mandating that all cell phones be compatible with 3rd-party MicroUSB chargers by January 1, 2012. I first wrote about this subject on SeekingAlpha on December 24, 2008, and this development is now reaching its final stages of lawmaking in Europe.

This new EU mandate isn’t a big deal at all for essentially every cell phone maker in the world, including Nokia, SonyEricsson (SNE), RIM (RIMM), Samsung, LG, HTC and Motorola (MOT), because they are in most cases already well underway of implementing the MicroUSB standard in all of their products. Just walk into your neighborhood AT&T (T), Verizon Wireless (VZ), Sprint (S) or T-Mobile USA store, and look for yourself – we will probably approach 90% MicroUSB exiting this year.

For Apple, however, this represents an ugly inconvenience. The iPhone uses Apple’s proprietary 30 pin connector, and there is a vast jungle of devices and docks built around this engineering decision. Therefore, it isn’t so easy for Apple to “just switch” to MicroUSB as it was for all the other cell phone makers. Apple at this point has two options:

1. Simply rid itself of its 30-pin connector in favor of MicroUSB. Most people seem to suggest that this is as unlikely as an Obama budget cut. Apple wouldn’t want to jettison its accessory ecosystem.2. Add a MicroUSB connector elsewhere on the device, presumably on top or on one of the sides. This appears more likely. It does, however, impose cost and an engineering problem with all sorts of ramifications, including aesthetics. Apple would do this kicking and screaming.

It has been suggested that there is a third way for Apple to comply with this new law. That would be to offer a 30-pin to MicroUSB adapter. This has the obvious advantage of not dealing with the painful two alternatives listed above. However, it has two deficiencies: (1) One more thing to carry and (2) It’s not clear whether this would comply with the EU mandate. I think it would be unlikely to comply, because it would be against the spirit of standardization and would require a piece of equipment that would largely negate the purpose of the law. The EU would also seize the opportunity to make life difficult for Apple by interpreting the EU ambition in this way, thereby further favoring their home area companies such as Nokia.

For Apple, “The European Problem” also becomes a global problem, because Apple doesn’t want to design two different iPhones – one for Europe and one for the US. Apple will eventually add more models, but this is an unnecessary degree of duplication it will not want to engineer.

Qualcomm more than survived the EU’s attempts to make life difficult for it, many years ago. Likewise, Apple will more than survive this attempt as well. That said, this represents a road bump in Apple’s product road map, of which I have not heard much to date. It’s over a year into the future, and whatever Apple decides to do, I don’t expect an implementation until June 2010 at the earliest.

There are many political ironies in this story. First and foremost, this is part of an industrial policy in the EU. We are being told day in and day out that industrial policy is such a good thing, despite that it’s been proven to be one of the greatest disasters of mankind. Now, Washington DC gets a taste of its own self-defeating medicine.

Another irony is that Apple, of course, is a product of as much of an industrial policy-free entrepreneurial environment as it gets. If Apple had been run out of Washington DC, it would have looked like the US Post Office competing with FedEx. Instead, Apple has proven itself to be perhaps the greatest innovator of its kind, yielding more success than imagined years ago precisely because of the lack of anygovernment mandates deciding its business. Walk into any Apple Store, Mr and Mrs America, and you will find that Apple offers its own insurance policy for some $99 per year (“AppleCare”), which is completely privately funded and completely unregulated. And customers love it.

Saturday, June 6, 2009

I played with the Palm Pre for a few hours today, at two different Sprint Stores. My review below is not a comprehensive review (go to www.engadget.com and equivalent for that), but it does point out my observations and comparisons.

First, what are the positives?

1. Unlike iPhone, it uses the same standard MicroUSB as the newest Blackberries and for that matter all other new handhelds. This is the standard for the next decade and means a lot of simplicity and savings.2. The screen is beautiful and it seems to render web pages very well, better than Blackberry version 4.6 anyway (soon-to-be-released 5.0 is another thing). It seems similar to iPhone in the web browsing department.3. The user interface uses “cards” that is in my opinion better than the iPhone. It is the most elegant operating system on the market today. Extremely impressive, extraordinarily elegant interface. This blows the iPhone out of the water and sets a new bar.4. The address book seems clearly better than the juvenile and generally limited one in the iPhone, which is only good if you have perhaps 100 or 200 entries. The Pre address book seems capable of handling 20,000 or more entries, such as sorting the entries well (“company name, followed by last name and first name”) seemingly similar to the Blackberry.5. True multitasking, just like Blackberry, Google/Android and Microsoft – and unlike iPhone.6. Sprint has a great “everything you can eat” plan for $100/month and it includes the great SprintTV service. In addition, Sprint is the only carrier that can give you a combo EVDO/WiMax modem for your laptop/PC/computer.7. Over-the-air updates, unlike the iPhone and as of yet all-but-two Blackberries (8350 and 9530).What are the negatives?

1. The sliding keyboard means it is difficult (impossible?) to use a protective cover of any kind – rubber, silicone, plastic, whatever. Somehow I expect a lot of complaints from people dropping it on the ground and scratching it.2. The keyboard sure beats iPhone, but it’s not nearly as good as a Blackberry 8300 model and up. It is extremely small and has a nasty edge to it.3. No GSM/HSPA for international travel, unlike the vital Blackberry models sold at Verizon and Sprint.4. The battery is small, and is likely to generate inferior performance compared to the Blackberry 8800 models and up.5. It doesn’t allow for secure communications (PIN-to-PIN) and truly encrypted emails. In other words, just as with the iPhone, Microsoft and Google, it can’t compete with the Blackberry in the area of security. As with all the other non-Blackberry platforms, you won’t be seeing this phone used by the Department of Defense, CIA, FBI, White House, Congress, investment banks and consultancies anytime soon.6. There is no expandable memory, compared to Blackberry where 8900 models and up can handle 32 gig.7. It can’t record video, unlike the Blackberry.8. It can’t be used as a modem for your laptop/PC/computer, unlike the Blackberry.

Bottom line: This is a very attractive phone. In my opinion, it beats the current iPhone (launched July 2008 and expiring June 8, 2009) in every single category except two (no GSM and limited AppStore selection as of yet). The “cards” interface is revolutionary – in a positive way! I have no doubt that Palm will take significant market share with this device, and for good reason. That said, I don’t see why a Blackberry user should switch, especially given that all current Blackberries refresh between July 2009 and November, providing superior hardware with a much-improved browser. By the time we find out the level of maturity of this new Pre platform, the outstanding new Blackberries will be in the market. Now that both Palm Pre and Blackberry synchronize with iTunes, the rationale for getting an iPhone is a lot weaker. Blackberry’s AppWorld is on a path to match Apple’s AppStore, and the Palm Pre shouldn’t be too far behind in coming months. That said, Apple will be introducing new products on June 8, 2009, and that could in turn change the game soon enough.